From Law.Com and its Legaltech news former Microsoft CTO Adrian Clarke (Evident Proof) reports on the technology of Blockchain and its purported major security benefits for the supply ecosystem. “The blockchain is a transaction ledger that is uneditable and virtually unhackable. New information can be written onto the blockchain, but the previous information (stored in what are known as blocks) can’t be adjusted. Every single block (or piece of data) added to the chain is given an encrypted identity. Cryptography effectively connects the contents of each newly added block with each block that came before it. So any change to the contents of a previous block on a chain would invalidate the data in all blocks after it.” Clarke’s report here is perhaps some comfort for an exponentially growing sector of the world wide economy which relies on supply chain management on a massive scale. See his piece in Law Journal Newsletters at http://tinyurl.com/y7mqfnem
Attorneys Bill Cheng and John Frank Weaver at McLane Middleton, P.A. in New Hampshire posted this piece in the NH Business Review at: http://tinyurl.com/yblh6nqp regarding the interaction between Blockchain and Bitcoin and how the GDPR for example will struggle to deal with these technologies, given the protections that GDPR attempts to provide to data owners so that they can control their personal information and data. Blockchain, particularly in conjunction with Bitcoin as the currency for a Blockchain secured transaction will prove a challenge to the GDPR rules. CTOs, Industrial Engineers and Supply Chain designers have big decisions to make in the years to come regarding security and whether Blockchain is the answer to some data protection issues. Photo courtesy of Law.Com.
Posted by Henry M. Sneath, EsquireCo-Chair Litigation Practice Group and Chair of the IP Practice Group: Houston Harbaugh, P.C.401 Liberty Avenue, Pittsburgh, Pa. 15222. Sneath is also an Adjunct Professor of Law teaching two courses; Trade Secret Law and the Law of Trademarks and Unfair Competition at Duquesne University School of Law.Please contact Mr. Sneath at 412-288-4013 email@example.com.
Posted onJuly 18, 2018byHenry Sneath|Comments Off on DTSA (DEFEND TRADE SECRETS ACT) CLAIMS INCREASE DRAMATICALLY IN 2017 AND 2018
FROM DTSALaw®: As we have previously predicted on these pages (and at www.dtsalaw.com ), the number of DTSA lawsuits has risen dramatically in 2017 and the first two quarters of 2018. Lex Machina and IPLaw 360 report that DTSA lawsuits increased from roughly 900 suits to over 1100 in 2018. In the first two quarters of 2018, the number of filings already is 581. The DTSA is still working its way into the legal community’s knowledge base and many practitioners may still be unaware of the most important benefit – of automatic Federal Court jurisdiction for trade secret cases under the 2016 DTSA that involve interstate commerce. The DTSA was signed into legislation as an amendment to the Economic Espionage Act (EEA) and with EEA is a powerful tool in the arsenal of litigation strategies in both the employment and non-employment arenas. Many DTSA claims are part of claims brought to enforce employment restrictive covenants, which restrictive covenant claims themselves are becoming disfavored by the states and their courts. As “non-compete” claims find less favor with the courts, lawyers should look carefully at the DTSA (and EEA) for civil claims that might apply. IPLaw 360 reports as well that only 19 cases filed to date have reached a conclusion on the merits of trade secret misappropriation. Results were essentially evenly split between plaintiffs and defendants. Houston Harbaugh, P.C. (www.hh-law.com) has an aggressive employment and trade secret practice and Pittsburgh is seeing a number of new cases filed in its Western District Pennsylvania Federal Court. DTSALaw® is a registered trademark of Houston Harbaugh, P.C.
Is Quantum Computing the next Tech frontier? Collaboration between researchers at Google and UC Santa Barbara are working on super computing qubits which might lead to “quantum supremacy” in the computing world. One chief researcher describes it as the desire to “perform an algorithm or computation that couldn’t be done otherwise.” Where classical computers function in two states, zeroes and ones – qubits perform in three states with the extra state being a “superposition” of both zero and one “raising exponentially the number of possible states a quantum system can explore.” For more details seePhys.ORG
From Legal Tech News and ALM comes a good lawyer practice tip report from Federal Judges Sallie Kim and Xavier Rodriguez. Major hint is for lawyers to go back and read the 2015 revisions to the Federal Rules which govern discovery, data collection and electronic productions of documents. Read the article here on ALM/Legal Tech: http://tinyurl.com/yclmj9hv
Blackberry is still in the hunt. I have one. I need the keyboard. Can’t seem to make even my skinny fingers hit the virtual keyboard letters and numbers on an iPhone. I get teased by my kids. People on airplanes pull out their Blackberrys and say “Hey – you’re a dinosaur too.” However, look at Blackberry now flexing their patent muscles and suing Facebook, WhatsApp and Instagram. Take that big boys. Thanks to Steve Brachmann and IPWatchdog for bringing us the story at this link: http://tinyurl.com/y9drr6hk . Blackberry pleads pre-emptory claims that seek to avoid dismissal per §101 “Alice” defenses. This “getting ahead of 101” in pleading is becoming the rage in patent suits. Great article. Thanks IPWatchdog.
Walmart has applied for a Drone Pollinator presented in the recently published application as “Systems and Methods for Pollinating Crops Via Unmanned Vehicles.” Here is Application # US2018/0065749 A1 at this link from FreshPatents.com: http://images2.freshpatents.com/pdf/US20180065749A1.pdf
The PTO App abstract describes essentially the same process used by Bees, and scientists at Walmart, Harvard and many other institutions have been working to create an efficient way to pollinate many of the plants from which we get our food during the last two decades of declining bee populations. Here is a good article from Science Alert detailing and linking to some of the efforts to create a drone pollinator:http://tinyurl.com/y93a7z7y
Here is a photo of the Harvard latest edition drone “RoboBee” which allegedly cannot yet be remotely controlled. The Walmart patent claims such an ability. We will follow.
Posted by Henry M. Sneath, Esq. at HoustonHarbaugh, P.C. in Pittsburgh, Pa.
From our friends at Law.Com: In the growing market for cyber insurance, carriers are trying to compete on price. One carrier, Coalition is offering discounts if your company creates a partnership with a “white hat hacker” and establishes a bug bounty with that hacker. The hacker gets a bounty for finding vulnerabilities. Legal Tech author Rhys Dipshandetails the program in the article at this link: http://tinyurl.com/ydck3nxg
Dipshan reports that “bug bounties” are becoming a popular weapon in combating cyber attacks. “Unsurprisingly” Dipshan reports, “bounty programs are becoming increasingly common in the tech and corporate world, with companies such as Facebook, Microsoft and Uber offering compensation for vulnerability disclosures. They also have caught on in the federal government as well, with the Department of Defense launching its “Hack the Pentagon” and “Hack the Air Force” programs.” Do you need a cyber bounty hunter?
We are pleased to announce that the Pit IP Tech Blog has been named one of the Top 100 IP blogs on the net by Feedspot. The Pittsburgh law firm of Houston Harbaugh looks forward to continuing our coverage of IP and technology news and hope that you will continue to read our blog. Thanks for making us a Top 100 blog!
In an apparent case of first impression, a divided three-judge panel of the Pennsylvania Superior Court recently held that an employer does not owe a legal duty to its employees to protect the employees’ electronically stored personal and financial information. In Dittman v. UPMC, decided on January 12, 2017 (docket no. 971 WDA 2015), the Superior Court affirmed an opinion of the Court of Common Pleas of Allegheny County, PA (opinion by the Honorable R. Stanton Wettick, Jr.), sustaining defendant University of Pittsburgh Medical Center’s (“UPMC”) preliminary objections to an employee class action suit. The suit arose from a data breach of the employees’ personal information, which was provided to UPMC as a condition of employment.
The employees sued UPMC for negligence and breach of contract after their names, birth dates, social security numbers, tax information, addresses, salaries and bank information were stolen due to the data breach. Specifically, they alleged that UPMC failed to properly encrypt data, establish adequate firewalls and implement adequate authentication protocols to protect the information in its computer network. All of UPMC’s 62,000 employees and former employees were affected by the breach. Appellants consisted of two separate but overlapping classes. One class alleged that the stolen information had already been used to file fraudulent tax returns and steal the tax refunds of certain employees. The other class consisted of those who had not suffered this harm but alleged that they were at increased and imminent risk of becoming victims of identity theft crimes, fraud and abuse.
To determine whether a duty of care exists, the Pennsylvania courts look to five factors, none of which are determinative alone. Seebold v. Prison Health Servs., Inc., 57 A.3d 1232, 1243 (Pa. 2012); Althaus ex. rel. Althaus v. Cohen, 756 A.2d 1166, 1169 (Pa. 2000). The five factors are:
the relationship between the parties;
the social utility of the actor’s conduct;
the nature of the risk imposed and foreseeability of the harm incurred;
the consequences of imposing a duty upon the actor; and
the overall public interest in the proposed solution.
In Dittman, the court found that the first factor weighed in favor of finding a duty because the employer-employee relationship gives rise to duties on the employer. The court next weighed the second factor against the third: the need of employers to collect and store personal information about their employees against the risk of storing information electronically and the foreseeability of data breaches. The court concluded:
While a data breach (and its ensuing harm) is generally foreseeable, we do not believe that this possibility outweighs the social utility of electronically storing employee information. In the modern era, more and more information is stored electronically and the days of keeping documents in file cabinets are long gone. Without doubt,employees and consumers alike derive substantial benefits from efficiencies resulting from the transfer and storage of electronic data. Although breaches of electronically stored data are a potential risk, this generalized risk does not outweigh the social utility of maintaining electronically stored information. We note here that Appellants do not allege that UPMC encountered a specific threat of intrusion into its computer systems.
Analysis of the fourth factor looks to the consequences of imposing a duty. In this situation, the court considered that data breaches are widespread and that there is no safe harbor for entities storing confidential information. It was also the court’s opinion that no judicially created duty of care is needed to incentivize companies to protect confidential employee information because other statutes and safeguards are in place to prevent employers from disclosing confidential information. Thus, the court concluded that “it unnecessary to require employers to incur potentially significant costs to increase security measures when there is no true way to prevent data breaches altogether. Employers strive to run their businesses efficiently and they have an incentive to protect employee information and prevent these types of occurrences.”
Finally, the fifth factor looks to whether there is a public interest in imposing a duty. The Superior Court found persuasive the reasoning of the trial court that imposing a duty here would greatly expend judicial resources and would result in judicial activism. The Superior Court agreed with the trial court that the Pennsylvania legislature has considered the same issues and chose only to impose a duty of notification of a data breach. “It is not for the courts to alter the direction of the General Assembly because public policy is a matter for the legislature.”
Weighing all five factors, the court held that the factors weighed against imposing a duty. Judge Stabile filed a concurring opinion, which Judge Olson, the writer for the majority opinion, joined. Judge Stabile agreed with the ruling but emphasized that the law in this area is quickly changing and that the ruling was based on the facts pled in that particular case. One of the key facts for Judge Stabile was the fact that the employees had not alleged that UPMC was on notice of any specific security threat. In a dissenting opinion, Judge Musmanno concluded that allegations that UPMC failed to properly encrypt data, establish adequate fire walls and implement appropriate authentication protocols was sufficient to allege that UPMC knew or should have known that there was a likelihood data would be stolen. Judge Musmanno also disagreed with the majority’s assumption that employers are sufficiently incentivized to protect employee data without a duty imposed upon them to do so.
The employees filed a motion for reconsideration and reargument on January 26, 2017. Thus, the Superior Court’s January 2017 opinion may not be the final word on the issue.
Dittman is interesting in the world of data breach lawsuits because it does not address standing. Many data breach defendants have relied upon the theory that plaintiffs lack standing to bring claims for data breaches where plaintiffs cannot prove actual harm from the breach. Proof of actual harm can be challenging because evidence regarding the use of the stolen information may be difficult to find. Here, standing was not discussed by the Superior Court. In the trial court below, UPMC had argued that the claims against it should be dismissed on the grounds that the employees lacked standing to assert claims on behalf of employees who had not yet been injured. UPMC also asserted that the employees’ negligence and breach of implied contract claims failed as a matter of law. After oral argument on these issues, the trial court ordered both parties to file supplemental briefs on the issue of whether UPMC owed a duty to its employees with respect to the handling of their personal and financial data. This ultimately proved to be the issue that the trial court and the Superior Court found to be determinative.
On June 16, 2016, the U.S. Supreme Court issued an opinion on awarding attorneys’ fees in copyright cases for the first time in two decades and issued the first copyright case in two years. The case is Kirtsaeng v. John Wiley & Sons Inc., case number 15-375. Section 505 of the Copyright Act provides that a district court “may . . . award a reasonable attorney’s fee to the prevailing party.” The issue presented to the Supreme Court was whether a court, in exercising that authority, should give substantial weight to the objective reasonableness of the losing party’s position. The court held that it should but that courts must also give due consideration to all other circumstances relevant to granting fees. It further held that the district courts retain discretion, in light of those factors, to make an award of attorneys’ fees even when the losing party advanced a reasonable claim or defense.
Kirtsaeng, who was from Thailand, came to the U.S. to go to Cornell University. While there, he discovered John Wiley & Sons, an academic publishing company, sold virtually identical, English language textbooks in the U.S. and Thailand, but sold them at a much cheaper price in Thailand. He had family and friends in Thailand buy the books, ship them to him in the U.S. and sold them at a profit.
Wiley sued Kirtsaeng for copyright infringement, claiming Kirtsaeng’s sale of the books violated its exclusive right to distribute its textbooks. Kirtsaeng invoked the “first sale doctrine” as a defense, which enables the lawful owner of a book (or other work) to resell or otherwise dispose of it as he or she wishes. Wiley countered that the first sale doctrine did not apply to books manufactured abroad. The circuit courts were split on the issue, and the issue went up to the Supreme Court. The Supreme Court agreed with Kirtsaeng and held that the first sale doctrine does allow the resale of foreign made books.
Kirtsaeng went back to the district court and sought $2 million in attorneys’ fees as the prevailing party pursuant to section 505. The District Court denied the motion, relying on Second Circuit precedent that gave “substantial weight” to the “objective reasonableness” of Wiley’s infringement claim. The rational for that approach was that the imposition of a fee award against a copyright holder with an objectively reasonable—although unsuccessful—litigation position will generally not promote the purposes of the Copyright Act. The District Court and the Second Circuit, on appeal, agreed that Wiley’s position was reasonable. They also found that the other factors to be considered did not outweigh the reasonableness finding. These non-exclusive factors were set forth in Fogerty v. Fantasy Inc., 510 U.S. 517 (1994). In that case, the Supreme Court identified the non-exclusive factors as the frivolousness of the case, the loser’s motivation, the objective unreasonableness of their case, and considerations of compensation and deterrence, all of which are to be applied in a manner that’s faithful to the purposes of the Copyright Act.
In Kirstaeng, the Supreme Court explained that objective reasonableness can be only an important factor in assessing fee applications—not the controlling one. District courts must take into account a range of considerations beyond the reasonableness of litigating positions. Thus, a court may award fees even though the losing party offered reasonable arguments. The Supreme Court cited as an example the situation where a court orders fee-shifting because of a party’s litigation misconduct, or the court decides to deter repeated instances of copyright infringement (i.e. copyright infringement “trolls”). “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals” (for instance—enriching the general public through access to creative works).
The Supreme Court concluded that the Kirstaeng matter should be remanded to the District Court because it appeared that the court had put too much emphasis on the “reasonableness” question. Thus, the Supreme Court ordered the remand to ensure that the District Court evaluates the motion consistent with the analysis that it set forth—giving substantial weight to the reasonableness of Wiley’s litigating position, but also taking into account all other relevant factors.
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Contact our Pittsburgh Intellectual Property, Data Security, Trade Secret, DTSA and Technology Attorneys at Houston Harbaugh, P.C. through IP Section Chair Henry M. Sneath at 412-288-4013 or firstname.lastname@example.org. Some posts herein were published by the law firm Picadio Sneath Miller & Norton, P.C. (PSMN®) which has merged with HoustonHarbaugh, P.C. and are used by permission. DTSALaw® is a federally registered trademark. See Firm Website at: www.hh-law.com